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USD Momentum Stalls as Yields Partially Retrace Post-CPI Move

FOREX
  • A retracement for US yields on Wednesday, and specific outperformance for the front-end of the treasury curve, has weighed on the USD index. The 0.25% decline, however, remains very small compared to the post-CPI 0.85% advance. A recovery across major equity benchmarks, softer UK CPI inflation and Chicago Fed’s Goolsbee sticking to his dovish guns have all helped stall the greenback's topside momentum.
  • Outperformers on the session include the likes of AUD and NZD, to be expected after their punchy declines on Tuesday. They join both the SEK and NOK at the top of the G10 leaderboard.
  • EUR/USD crept to a new daily high through the London close, extending the bounce off the overnight lows to just over 30 pips, but highlight the contained ranges on Wednesday. Conditions remain bearish overall, with the recent breach of both 1.0724, the Dec 8 low, and 1.0712, 61.8% of the Oct - Dec bull leg, reinforcing current sentiment. Focus on the downside will be on 1.0656 next, the Nov 10 low, whereas initial resistance comes in at 1.0816, the 20-day EMA.
  • A very quiet session for USDJPY, although it is worth noting that neither lower US yields nor verbal warnings from the MOF have been able to prompt a meaningful relief bounce, with the pair consolidating around 150.50 as we approach the APAC crossover. Above here, 151.43, the November 16 high comes into focus, inching ever closer to the multi-decade highs at 151.95. Initial support moves up to 148.03, the 20-day EMA.
  • A busy docket on Thursday is kickstarted by RBA Governor Bullock speaking before Australian employment data for January. UK growth data headlines the European session before retail sales, initial jobless claims, Philly fed and industrial production data cross in the US.
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